Thorp v. McCullum

The Opinion of the Court was delivered by Scates, J. This was a bill for an injunction and for relief. So much of the history of the case, as will present the question submitted for our consideration is this. John McCullum died seized of certain lands, leaving a widow and three children. The widow and John D. Whitside administered. The personal estate being insufficient to pay the debts, an application was made, and an order of the Circuit Court granted to sell certain lands, including the tract in question. At the sale, Sarah McCullum, the widow and administratrix, was the highest and best bidder, and became the purchaser. John D. Whiteside, the administrator, alone executed a deed to her for the premises, but omitted to recite at large in the deed the order of the Court. Sarah then intermarried with M. Chilton, and they, for á valuable consideration, sold and conveyed the premises to W. Dagger, and he, for a valuable consideration, conveyed to H. B. Thorp, who has had possession and made valuable improvements. The heirs of the intestate commenced an action of ejectment against Thorp for the land. Thorp and Dugger filed this bill to enjoin them at law, and io compel the administrators to perfect the deed made by John D. Whiteside as administrator. The Court below sustained a demurrer to, and dismissed the bill, and this is assigned for error. It is agreed, between the counsel of the parties, that the Court shall decide the case without regard to technical points, and should they be of opinion that the title can be confirmed upon the state of facts in the bill, the judgment is to be reversed, and cause remanded; — if not, the judgment to be affirmed without prejudice, as to the taking an account, &c. There can be no doubt, but that the Court could allow and compel the administrator to amend the deed, by inserting in the deed, a recital of the order of sale at large, in compliance with the statute under which it was executed. Nor should I stop here. Where the sale had been regularly and fairly made, for a valuable consideration, and the deed executed by one administrator only,. I should not permit advantage to be taken of such defective execution of a power, but would compel the co-administrator to join in the execution of the power, and not permit a fair purchaser for a valuable consideration to be defrauded by such an advantage. If it were a mere power, the Court would not; but where there is a duty and a trust to be performed by the proper exercise of the power, as here, the Court will compel it. 8 Vesey, 570-6; 1 Atk. 469. But a question of much graver import is presented. Administrators act in a fiduciary character, in the collection of debts, the sale of property, and settlement of estates. The general principle of equity is, that trustees and others sustaining a fiduciary and confidential relation, cannot deal on their own account with the thing, or the persons, falling within that trust, or relationship. This rule is not universal, but general. Whether Sarah McCullum, the administratrix and purchaser, falls within the general rule as to this sale, is the question before us in this case, brought by’purchasers from her, but with legal notice of the defect in the deed, by its being recorded. The general rule is as I have it laid down, and has been applied to those who- are strictly trustees, to assignees, commissioners, and solicitors of bankrupts, executors, administrators, guardians, agents, and officers of the Court, and all others, in whom there is a trust and confidence reposed, which would bring in conflict, the interest of the trustee, and the cestui que trust. This rule is broadly laid down in the following authorities; 1 Vesey, 9; 3 do. 740; 5 do. 682; 6 do. 617, 625, 631; 8 do. 337; 10 do. 385; 12 do. 95; 13 do. 355, 600; 2 Caines’ Cases, 183; 5 Johns. 43; 2 Johns. Ch. R. 254; 8 Bro. P. C. 42; 2 Sugden on Vendors, 123; 2 Har. & Johns. 482; 14 Pick. 359; 4 Porter, 283. Justices Tucker and Roane, in Anderson and Starke v. Fox et al. 2 Hen & Mun. 261-5, intimated very strongly that this rule did not. apply in Virginia to the purchase by an executor, as numerous suits might arise out of it, there being many purchases of the kind made. The point was not, however, decided in that case. The Court in Kentucky, in Haddix’s Heirs v. Haddix’s Adm’rs, 5 Lit. 203, recognized the general rule as applicable to trustees; but following the intimation of the Virginia Court, they distinguished and excepted from it a purchase made by an administratrix, and sustained it. But the broad rule has since been adopted, and applied to executors, and a purchase by one under a power in the will, authorising him to sell, was set aside in Grider v. Paine, 9 Dana, 190. These decisions cannot shake a rule so well settled, and so long adhered to and practised, not only in England, but most of the States, whose decisions have fallen within my reach. Indeed it is too sound a rule of policy, although arbitrary and inflexible, and too well supported by reasons deduced from observation and experience, to yield to particular cases of hardship. The temptation of self interest is too powerful and insinuating to be trusted. Man cannot serve two masters; he will forsake the one and cleave to the other. Between two conflicting interests, it is easy to fore's ee, and all experience has shown, whose interests will be neglected and sacrificed. The temptation to neglect the interest of those thus confided must be removed by taking away the right to hold, however fair the purchase, or full the consideration paid; for it would be impossible, in many cases, to ferret out the secret knowledge of facts and advantages of the purchaser, known to the trustee or others acting in the like character. The best and only safe antidote is in the extraction of the sting; by denying the right to hold, the temptation and power to do wrong is destroyed. Lord Hardwicke, at one time, excepted from the general rule a fair sale at public auction, and sustained the purchase by the trustee, 1 Cruise’s Dig. 498. Again, in Whelpdale v. Cockson, referred to in Campbell v. Walker, 5 Vesey, 682, it was held, that where a majority of the cestui que trusts agreed, and the sale was fair, that a purchase by a trustee would be sustained. From the language used by Lord Rosslyn, in Whichcote v. Lawrence, 3 Vesey, 749, another distinction was taken and insisted on, that unless the purchaser had gain and advantage by his purchase, the sale would be sustained. But all these distinctions have been overruled, and the broad rule now obtains, as laid down above, that all persons sustaming fiduciary relations to persons or property entrusted to their management, cannot hold such property by purchase, if the cestui que trust, or those for whom they act, or who are interested in the property, object to their purchase, within a reasonable time. 6 Vesey, 625; 8 do. 337; 10 do. 385; 2 Johns. Ch. R. 252; 4 Porter, 283. / But the purchase is not void, but only voidable. 14 Pick. 359; 12 Vesey, 354; 2 Sugden on Vendors, 143. It is a rule of disability in the party to hold, when objected to, and questioned by those having an interest, who may have the sale set aside by bill, and a re-sale ordered, if deemed for their advantage. And in doing so, the Courts may, and frequently do order the premises to be put up at the amount of the former purchase, and if no advance upon that sum is made, hold the trustee to his purchase. But the remedy of the party, however, is in a Court of Equity for relief. 2 Williams on Ex’rs, 689; 1 Bingh. 50; 7 Moore, 351. For a Court of Law will treat it as a valid sale, unless there be fraud. 14 Johns. 407. The cestui que trust has, therefore, an election to affirm, or disaffirm the sale. It is insisted, that a demurrer to a bill is not an election. I am of that opinion, that an election cannot be made by demurrer. For the practice is uniform, and the principle is well sjettled in these cases, that the Court may, on setting aside these sales, and on ordering a re-sale, order a reference to the Master to ascertain the purchase money and interest, the value of improvements, if any, and also to take an account of the rents. And a decree is always made to re-imburse these sums, after deducting the value of the rents, &c. out of the amount of the re-sale; or if there is no re-sale, then these sums will be ordered to be re-imbursed, and the premises ought to be subject to refund the amount. If a demurrer to the bill for specific performance, or other relief, is an election to disaffirm, the party may ever, by interposing a demurrer, put it out of the power of the Court, to secure the purchaser, by ordering his money to be reimbursed in the same proceeding by which the sale is set aside. 8 Vesey, 337, and authorities before referred to. The demurrer only raises a question of the legality of the sale. The sale is valid in equity, as well as at law, unless the cestui que trust elect to avoid it. Then a Court of Equity may,' and will, avoid it; a Court of Law cannot. The demurrer will not show the will of the party to avoid it. In Munro v. Allaire, 2 Caines’ Cases in error, 183, the widow who was entitled to an interest under a will, sold that interest to the executor. She afterwards sold and conveyed to another. The executor filed a bill against both for a specific performance of his contract of purchase. The Court sustained a demurrer to the bill, but it is observable, in this case that the vendor had expressly elected to disaffirm, in selling and conveying to another, as shown by the bill. So the question may be regarded as open, so far as that case is concerned. In this case, the heirs set forth nothing upon the record, showing whether they wish to avoid the sale or not. However inflexible the rule may be in annulling such sales, when objected to, it has no application, except at the instance, and upon the election of the cestui que trust, or others having an interest; for it would never be done at the instance of the purchaser, and against the will of the cestui que trust. I am clearly of opinion, that the demurrer ought to have been disallowed, so far as the mere question of the legality of the sale was concerned. But there is another important view of the case to be considered. The deed was defective, and would not entitle the purchaser to retain her rights at law, nor those claiming under her, for want of a recital at large of the order of Court granting the sale according to the statute, as settled in the case of Smith v. Hileman, 1 Scam. 325. There can be no doubt of the power and duty of the Court, in a proper case, to aid the party by ordering a perfect execution of the power, so as to prevent injustice, and secure the rights and interest of a bona fide purchaser for a valuable consideration. 2 Mun. 129; 3 Ham. 529; 1 Russ. & My. 418; 8 Vesey, 570; 5 Blackf. 587; 3 Edw. 20; Fonblanque’s Eq. 54; 2 Williams’ Ex’rs, 689, 690; 2 Barb. & Har. Dig. 381, §2; 4 do. 189, §13. But it is objected here, that a power executed by one of several trustees, is void. And that applies equally to trusts or powers coupled with an interest, an'd where the trust will survive as to mere naked powers. I know that this doctrine is thus broadly and generally laid down in St. Clair v. Jackson, 8 Cowen, 543, and correctly enough for the facts of that case, where three executors by name, or the survivors or survivor of them, were empowered to execute a lease, which was executed by two making a power of attorney, the third being alive. Here the parties acted under a limitation, a restricted power. And such facts existed in the two decisions cited from Reports to support it. One was in 14 Johns. 560, where by will the executors, or a major part of them, were empowered to do an act, and which was performed by a sole surviving executor. The other case was in 6 Johns. 39, where a submission was made to five arbitrators, without any provision that a less number might act. In both these cases, the act of the minority was held void. And well enough, because they acted under a restricted power. The other authority cited for this position, I have not been able to see. With this, as a special rule applicable to restricted powers, I concur. But I cannot concur in it, as a general rule, applicable to general powers relating to trusts. The- general rule ought to depend upon the nature of the power, and its objects. It is laid down by the Chancellor, in Brown v. Higgs, 8 Vesey, 570, in these words: “But there are, not only a mere trust, and a mere power, but there is also known to this Court, a power, which the party, to whom it is given, is entitled and required to execute; and with regard to that species of power, the Court considers it as partaking so much of the nature, and qualities of a trust, that if the person, who has that duty imposed upon him, does not discharge it, the Court will, to a certain extent, discharge the duty in his room and place.” See also, 1 Atk. 469. For no trust shall fail in equity for want of a trustee. Executors and administrators have a power, connected with a trust in collecting, selling, and paying debts, and distributing the surplus. If there are no limitations in the will, restricting the persons, or the manner of executing these powers, the Court will aid to give effect to a fair sale or transaction, which cannot take effect otherwise, on account of a defective execution of their powers conferred bylaw. In attempting to perform these duties, the administrators make a sale of the land, and one only executes the conveyance. Here is a defective conveyance of the power by one, which the law has conferred upon both. But it partakes “so much of the nature and qualities of a trust,” that “the Court will, to a certain extent, discharge the duty in his room and place,” by compelling the other administrator, in a proper case, to join in the conveyance. But the bill, in this case, neither avers nor sets out any consideration paid by the administratrix, the purchaser, for this tract of land. Parties coming to ask the aid of a Court of Equity, must come not only with clean hands, but with the merits of a good or valuable consideration paid, or an offer or readiness to perform all things on their part. However liberal, generous and meritorious her conduct may have been towards the heirs, in the general management of the estate, it cannot enter into and constitute a consideration for this land, either good or valuable in law. For want of this averment of consideration paid for the land, or some statement showing it, we are of opinion that the demurrer was properly sustained. We are further of opinion, that the sale would be voidable at the election of the heirs, even though a full consideration had been paid. We are also of opinion that a demurrer would not lie to the bill, simply on the ground that an administratrix purchased at her own sale; that a demurrer is not an election to avoid the sale; that a Court of Equity has power to aid such defects in the execution of a power as are pointed out in this case. This opinion is given, without reference to the rights or liabilities of the parties, in any other proceedings, to put the heirs to an election, or for an account. Judgment affirmed, each party paying their own cost.